Hielko Posted January 30, 2015 Share Posted January 30, 2015 This sucks........ How true. At the 2009 low CBI sold for 1 x book value. Right now we're at 1.3 x BV. This has got to be value territory for the stock. The US nuclear industry needs CBI, it will survive. But that means very little for equity holders. Companies can also survive after bankruptcy... Link to comment Share on other sites More sharing options...
AzCactus Posted January 30, 2015 Share Posted January 30, 2015 This sucks........ How true. At the 2009 low CBI sold for 1 x book value. Right now we're at 1.3 x BV. This has got to be value territory for the stock. The US nuclear industry needs CBI, it will survive. But that means very little for equity holders. Companies can also survive after bankruptcy... I don't claim to know an awful lot about this company, but this company is still profitable and growing. How is bankruptcy relevant at this point? Link to comment Share on other sites More sharing options...
KCLarkin Posted January 30, 2015 Share Posted January 30, 2015 I don't claim to know an awful lot about this company, but this company is still profitable and growing. How is bankruptcy relevant at this point? Free Cash flow and accounting profit are not in sync. But bankruptcy seems unlikely even if there is a liquidity crunch. Link to comment Share on other sites More sharing options...
Hielko Posted January 30, 2015 Share Posted January 30, 2015 This sucks........ How true. At the 2009 low CBI sold for 1 x book value. Right now we're at 1.3 x BV. This has got to be value territory for the stock. The US nuclear industry needs CBI, it will survive. But that means very little for equity holders. Companies can also survive after bankruptcy... I don't claim to know an awful lot about this company, but this company is still profitable and growing. How is bankruptcy relevant at this point? Of course bankruptcy is a remote possibility. Just pointing out that a statement, that the company will survive, is pretty meaningless. Equity returns could be between -100% and +a lot% and anything in between, just like a stock from a company that might not survive. Link to comment Share on other sites More sharing options...
valueyoda Posted January 30, 2015 Share Posted January 30, 2015 I wouldn't be a suprised by a takeover by Berkshire at this point. Link to comment Share on other sites More sharing options...
Buffetteer Posted January 30, 2015 Share Posted January 30, 2015 I built a 15% two days ago and this down so much right after I bought. It sucks in terms of that. :'( My average cost per share is $47+...don't complain :) Someone always has it worse! Link to comment Share on other sites More sharing options...
HWWProject Posted January 30, 2015 Share Posted January 30, 2015 I don't claim to know an awful lot about this company, but this company is still profitable and growing. How is bankruptcy relevant at this point? I was not at all suggesting bankruptcy, just pointing out a current value metric against a past historic low point, then saying this is value territory. I wouldn't be a suprised by a takeover by Berkshire at this point. Agree! Link to comment Share on other sites More sharing options...
dbuch Posted January 30, 2015 Share Posted January 30, 2015 Even if CBI is on the hook for $1B which is unlikely, they are essentially earning $600M a year and growing at 14% plus a year. So equity as of today ought to be worth at least $7000-$8000 billion worst case. As long as it's not enough to kill them, which I don't think is the case, then this should be a buying opportunity. Link to comment Share on other sites More sharing options...
PatientCheetah Posted January 30, 2015 Share Posted January 30, 2015 I built a 15% two days ago and this down so much right after I bought. It sucks in terms of that. :'( My average cost per share is $47+...don't complain :) Someone always has it worse! I didn't do much better $42, holding. haha Link to comment Share on other sites More sharing options...
DanielGMask Posted January 31, 2015 Share Posted January 31, 2015 I built a 15% two days ago and this down so much right after I bought. It sucks in terms of that. :'( My average cost per share is $47+...don't complain :) Someone always has it worse! I didn't do much better $42, holding. haha Oh we coatailers! I'm at $40.5. Link to comment Share on other sites More sharing options...
gokou3 Posted January 31, 2015 Share Posted January 31, 2015 I was in at $45-ish and have never been above water.. :-[ Link to comment Share on other sites More sharing options...
Buffetteer Posted January 31, 2015 Share Posted January 31, 2015 Still in the lead...yay! :) Link to comment Share on other sites More sharing options...
muscleman Posted January 31, 2015 Share Posted January 31, 2015 If you look at the chart, it will be very hard to catch the falling knife and stay above water. :) Link to comment Share on other sites More sharing options...
RadMan24 Posted February 1, 2015 Share Posted February 1, 2015 A lot of talk has been made of FCF and the nuclear projects, which are major risks. There are contracts out there and you just have to do the probability assessment of total amount CB&I will be on the hook for. With the recent delay, my figure is around $600-$700 million I am assuming and using in my models. Of course, this helps capture the worst case scenarios. Now in the case of FCF, if liquidity really dries up, it would seem to be CB&I has another option in their book. Lummus technologies is a very profitable and lucrative business. The earnings having been growing tremendously and the joint venture with Chevron is doing very well. Let's say it earns between $175-$250 million a year, CB&I, if they face a liquidity crunch because of cost overruns and other factors, decides to spin it off. I would guesstimate they could receive anywhere between $1.5-$2.5 billion from that spin off. The technology business in CB&I is very attractive and in a way adds protection to the downside. If there is evidence this is not feasible please let me know. But like many others, I've been buying from $50 on the way down to $33. I also have a very high holding time frame and the nuclear risks, no pun intended, have been increasing as well. Overall, I think there is value there if one digs deep. If Berkshire sells their whole position, I would expect another big volatile day, these are just some risks we face as investors in CB&I. Upside of course would be the end result is better than what you cautioned for. Edit: Mid-American abandoned plans for a new nuclear power plant due to excessive cost estimates and for it being just uneconomic. With nat gas so low, additional nuclear power in the US seems very unlikely and cost overruns over initial budget will likely keep making headlines. The link below shows the history has not been good, one would hope that once these projects are done they will finally be able to avoid delays to design changes and quality issues. http://www.psr.org/nuclear-bailout/resources/nuclear-power-plant.pdf Link to comment Share on other sites More sharing options...
valueyoda Posted February 1, 2015 Share Posted February 1, 2015 You should read the interview with Meredith Witmer at the Barron's Roundtable last year, which highlights the earnings power of Lummus. Eventually, a carve-out and a subsequent spin-off of this division would be necessary to highlight the company's intrinsic valuation. http://online.barrons.com/news/articles/SB50001424052748703892404578271840582558054?mod=BOL_qtoverview_barlatest I still believe that CBI could be a great acquisition target for MidAmerican. Buffett has done these deals before, where he could offer a decent premium to Friday's last close and still get it at a substantial discount to long-term intrinsic value. It seems probable that Todd and Meredith have brought this company to Warren's attention. Link to comment Share on other sites More sharing options...
RadMan24 Posted February 1, 2015 Share Posted February 1, 2015 You should read the interview with Meredith Witmer at the Barron's Roundtable last year, which highlights the earnings power of Lummus. Eventually, a carve-out and a subsequent spin-off of this division would be necessary to highlight the company's intrinsic valuation. http://online.barrons.com/news/articles/SB50001424052748703892404578271840582558054?mod=BOL_qtoverview_barlatest I still believe that CBI could be a great acquisition target for MidAmerican. Buffett has done these deals before, where he could offer a decent premium to Friday's last close and still get it at a substantial discount to long-term intrinsic value. It seems probable that Todd and Meredith have brought this company to Warren's attention. That interview was a steal of knowledge. One can look at Flucor and make a case it is undervalued as well, but the Lummus business is very attractive. That interview was a few years ago, so one should definitely look back hindsight and see what has changed and adjust their own views for sure. But definitely worth reading. In terms of Mid-American and nuclear power plants, Asia is going to account for the future growth (new plants), U.S. growth is still years away except for decommissioning and upgrades. Link to comment Share on other sites More sharing options...
jgyetzer Posted February 2, 2015 Share Posted February 2, 2015 Does anyone have any idea where to find separate financials for the CLG partnership? It does not seem to be broken out in the CBI filings. Link to comment Share on other sites More sharing options...
dbuch Posted February 2, 2015 Share Posted February 2, 2015 If you assume Lummus does $200M EBIT this year and could sell for 10x then the remaining part of CBI is trading at 2.5x EV/EBITDA. Link to comment Share on other sites More sharing options...
nnayyar Posted February 2, 2015 Share Posted February 2, 2015 Just wondering if anyone had any further thoughts on the potential for Goodwill writedown of the SHAW acquisition, especially after this delay? From last Q Goodwill was unch at 4.2B and taking from PP report, 3.3B is Shaw. As of Q1’2014, CBI had amassed $4.2 billion of goodwill, relative to a book equity totaling $2.6 billion (i.e., goodwill is 162% of CBI’s book value). $3.3 billion of that goodwill balance, or 126% of the consolidated company’s book value, is attributed to Shaw. This means that the company's shareholder equity would be negative without the Shaw goodwill and, generally, that any substantial write-down in goodwill would send shareholder equity plunging. Moreover, CBI’s Revolving Credit Facilities have a financial covenant that as of March 31, 2014 requires it to maintain a minimum net worth of $1.762B. CBI’s current net worth is $2.441B, meaning that a goodwill writedown of only $679m would result in a debt default. I have no issues with engineering/construction companies having discrepancy between reported earnings and FCF. But is PP accurate that the potential covenant would be breached with only a 697MM reduction in shareholder equity? Thanks for any thoughts! Link to comment Share on other sites More sharing options...
JAllen Posted February 2, 2015 Share Posted February 2, 2015 Has anyone found or looked at the contract with Westinghouse yet? Seems like that is really what CBI boils down to at this moment in time. It's on my list of things to look at soon. Link to comment Share on other sites More sharing options...
valueyoda Posted February 2, 2015 Share Posted February 2, 2015 Just wondering if anyone had any further thoughts on the potential for Goodwill writedown of the SHAW acquisition, especially after this delay? From last Q Goodwill was unch at 4.2B and taking from PP report, 3.3B is Shaw. As of Q1’2014, CBI had amassed $4.2 billion of goodwill, relative to a book equity totaling $2.6 billion (i.e., goodwill is 162% of CBI’s book value). $3.3 billion of that goodwill balance, or 126% of the consolidated company’s book value, is attributed to Shaw. This means that the company's shareholder equity would be negative without the Shaw goodwill and, generally, that any substantial write-down in goodwill would send shareholder equity plunging. Moreover, CBI’s Revolving Credit Facilities have a financial covenant that as of March 31, 2014 requires it to maintain a minimum net worth of $1.762B. CBI’s current net worth is $2.441B, meaning that a goodwill writedown of only $679m would result in a debt default. I have no issues with engineering/construction companies having discrepancy between reported earnings and FCF. But is PP accurate that the potential covenant would be breached with only a 697MM reduction in shareholder equity? Thanks for any thoughts! Yes, they have that covenant. So theoretically, a large goodwill writedown would cause a breach. However, this can easily be renegotiated. FCF generation at engineering companies always tends to be limited, as they typically grow their future earnings power by reinvesting their operating cash flows in expansion capex. Right now, investors need to assess the total damage at Plant Vogle and what the fallout will be in terms of energy capex reduction. I think that the company will lower their adjusted EPS guidance for 2015, but even if it would fall to $4.5 per share, the stock is incredibly undervalued. Link to comment Share on other sites More sharing options...
RadMan24 Posted February 3, 2015 Share Posted February 3, 2015 If you assume Lummus does $200M EBIT this year and could sell for 10x then the remaining part of CBI is trading at 2.5x EV/EBITDA. I see Lummus as downside protection against any worse case scenario on the nuclear projects. This will probably be the last nuclear project in the US for a while. Future projects will be in Asia and likely face less regulatory and design delays due to faster permit and design change approvals, labor cost, etc. That's my view as it stands today. Link to comment Share on other sites More sharing options...
undervalued Posted February 4, 2015 Share Posted February 4, 2015 And of course it plunges after I bought it. It makes sense. Link to comment Share on other sites More sharing options...
mttddd Posted February 4, 2015 Share Posted February 4, 2015 And of course it plunges after I bought it. It makes sense. haha that just means you can buy more Link to comment Share on other sites More sharing options...
wachtwoord Posted February 4, 2015 Share Posted February 4, 2015 I bought at $35 today. Let's see how much further it will go down 8) Link to comment Share on other sites More sharing options...
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